1) A security analyst has forecast the dividends of Hodges Enterprises for the next three years. His forecast is: D1 = $1.50; D2 = $1.75; D3 = $2.20. He has also forecast a price in three years of $48.50. The rate of return for similar-risk common stock is 14%. What is the value of Hodges common stock?
2) The dividend paid this year (D0) on a share of common stock is $10. If dividends grow at a 5% rate for the foreseeable future, and the required return is 10%, what is the value of the stock today? Last year (date t = -1)? Next year (date t = 1)?
3) The current price of a stock (P0) is $20 and last year’s price (P-1) was $18.87. The last dividend (D0) is $2. Assume a constant growth rate (g) in dividends and stock price. What is the stock’s return for the coming year?
4) A company pays a current dividend (D0) of $1.20 per share on its common stock. The annual dividend will increase by 3% and 4%, respectively, over the next two years (D1, D2), and by 6% per year thereafter. The appropriate discount rate is 12%. What is P0?